Perspective: Morning Commentary for October 30

Perspective: Morning Commentary

Arlan Suderman

Chief Commodities Economist

October 30 – Stock futures were again mixed overnight, with the market barely responding to this morning’s data release. The VIX continues to trade just below 20 this morning, while the dollar index trades near 104.4, after rallying on this morning’s jobs data. Yields on 10-year Treasuries are trading near 4.23%, providing the impetus for that stronger dollar, while yields on 2-year Treasuries are trading near 4.12%. Crude oil prices are 2% higher on reports that OPEC+ could delay its anticipated December output hike, while the grain and oilseed markets were quietly mixed overnight.

The U.S. economy grew at an annualized rate of 2.8% in the third quarter of this year, down a bit from the 3.0% growth seen in the second quarter, and down from analyst expectations that we would sustain 3.0% growth into the third quarter as well. But 2.8% growth is by no means an indicator of a recession, which is defined by consecutive quarters of negative growth. Personal consumption expenditures grew at an annual rate of 3.7% in the third quarter, which is up from 2.8% in the second quarter, and it is well above the 3.0% expected by analysts. Combining this with yesterday’s consumer confidence index survey data, it suggests that the consumer is increasingly comfortable with spending money. That’s not an environment in which you want to be too aggressive in cutting interest rates.

Today’s ADP employment report revealed that the private sector created 233K jobs in October, which was more than double the 115K anticipated by analysts. Furthermore, the previous month’s total was revised to 159K, up from the 143K originally reported. This is a strong private sector jobs report in the wake of two major hurricanes that provided a major disruption of business in the Southeast. One has to wonder how strong the numbers would have been if the hurricanes had not hit. The market has priced in expectations that Friday’s monthly jobs report from the government will show total jobs created at 125K, down from 254K the previous month. This raises speculation that we could see a strong report on Friday as well, although the correlation between the two reports is relatively weak. Nonetheless, a strong jobs report on Friday following two major hurricanes would likely lead members of the Federal Open Market Committee to think twice about being too aggressive with rate cuts when they meet next week.

The U.S. liquid biofuel program survives primarily on a system that subsidizes its production. That’s especially true for biodiesel, renewable diesel and sustainable aviation fuel. Soyoil is a primary feedstock for biodiesel, aided by a $1 per gallon credit. Under the so-called Inflation Reduction Act, that is replaced by 45Z credits on January 1 that are based on how much the feedstock / production process reduces carbon emissions, but the standards have not yet been released and may not be for some time. As such, biofuel producers are putting off soyoil purchases until next year, and some are considering a total shutdown, reducing demand for soybeans.

A lot of rumors are coming out of China this week regarding the import of soybeans. Our sources indicate that the General Administration of Customs announced at a meeting that they would require an extension of customs clearance times for three products, including barley, sorghum, and soybeans (regardless of origin). We already were well aware of China’s efforts to slow imports of barley and sorghum in order to support local prices following a big domestic harvest. Some suggest that soybeans were included in the list for the same reason, although domestically grown soybeans are primarily non-GMO soybeans grown for food versus the imported soybeans that are crushed for animal feed and oil. Regardless, rumors in China hint that some ports have issued orders putting a minimum one-month hold on customer clearance of these commodities.

One thing that we do know is that there is a lot of confusion within China over these directives, and that has led to many rumors spreading globally about China’s objective regarding soybeans. This may simply be due to port congestion following an aggressive import program from Brazil and Argentina this year that built up supplies. Some have speculated that recent active buying by crushers (40+ cargoes per week over the past several weeks) was panic buying fearing a Trump win in next week’s election that could result in tariffs, but Donald Trump wouldn’t even take office before January 20^th when China would have access to ample supplies of new crop Brazilian supplies. Some have speculated that this is all about trying to get crushers to draw down bloated state reserves, but that’s not the way the system works either. In reality, what makes most sense is that port congestion likely created the situation, and authorities are trying to slow the inflow to allow that congestion to clear. More significantly, it slows the inflow at a time when the United States needs to ship as many soybeans as possible before cheaper new crop Brazilian supplies become available in another 60 – 90 days. We’ll continue to monitor the situation within China, but there’s nothing bullish for U.S. soybeans about this development.

This material should be construed as market commentary and represents the opinions and viewpoints of the author, and does not reflect tailored advice associated with any specific account.

The views are current only through the date stated and are subject to change at any time based upon market or other conditions, and StoneX Group Inc. (“SGI”) disclaims any responsibility to update such views. Actual results, performance, or achievements may differ materially from those expressed or implied. Information is based on data gathered from what we believe are reliable sources. Past performance does not guarantee future results.

The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided.

References to certain OTC products or swaps are made on behalf of StoneX Markets, LLC (SXM), a member of the National Futures Association (NFA) and provisionally registered with the U.S. Commodity Futures Trading Commission (CFTC) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ and who have been accepted as customers of SXM.

StoneX Financial Inc. (SFI) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI is registered with the U.S. Securities and Exchange Commission (SEC) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Advisor. References to certain securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to certain exchange-traded futures and options are made on behalf of the FCM Division of SFI. Wealth Management is offered through SA Stone Wealth Management Inc., member FINRA/SIPC, and SA Stone Investment Advisors Inc., an SEC-registered investment advisor, both wholly owned subsidiaries of SGI.

StoneX Financial Ltd (SFL) is registered in England and Wales, company no. 5616586. SFL is authorised and regulated by the Financial Conduct Authority (FCA) (registration number FRN:446717) to provide services to professional and eligible customers including: arrangement, execution and, where required, clearing derivative transactions in exchange traded futures and options. SFL is also authorised to engage in the arrangement and execution of transactions in certain OTC products, certain securities trading, precious metals trading and payment services to eligible customers. SFL is authorised and regulated by the FCA under the Payment Services Regulations 2017 for the provision of payment services. SFL is a category 1 ring-dealing member of the London Metal Exchange. In addition SFL also engages in other physically delivered commodities business and other general business activities which are unregulated and not required to be authorised by the FCA.

StoneX APAC Pte. Ltd. (“SAP”) (Co. Reg. No 200616676W) is regulated as a Dealer (PS20190001002) under the Precious Stones and Precious Metals (Prevention of Money Laundering and Terrorism Financing) Act 2019 for purposes of anti-money laundering and countering the financing of terrorism. SAP is an “Approved International Trading Company” authorized to act as a “Spot Commodity Broker” under the Commodity Trading Act.

StoneX Financial Pte Ltd (Co. Reg. No 201130598R) (“SFP”) is regulated by the Monetary Authority of Singapore and is a Capital Markets Service Licensee (for dealing in capital market products), an Exempt Financial Adviser (for advising on investment products and issuing or promulgating analyses/ reports on investment products) and a Major Payment Institution (for cross-border money transfer service).

SFP may distribute analysis/report produced by its respective foreign affiliates within the StoneX Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations Recipients should contact SFP at (65) 6309 1000 for any matters arising from, or in connection with, this webinar.

StoneX Financial (HK) Limited (CE)No.: BCQ152) (“SHK”) is regulated by the Hong Kong Securities and Futures Commission for Dealing in Securities and Dealing in Futures Contracts.

StoneX Financial Pty Ltd (“SFA”)(ACN: 141 774 727) holds an Australian Financial Service License and is regulated by the Australian Securities and Investments Commission (AFSL: 345646).

StoneX Securities Co., Ltd. (“SSJ”)(Co. Reg. No 010401047199) is regulated by the Japanese Financial Services Agency as a Type-I Financial Instruments Business Operator (Kanto Local Finance Bureau (FIBO)No.291’), is a member of the Financial Futures Association of Japan for dealing and broking FX and FX Option transactions, and is a member of the Japan Securities Dealers Association for dealing and broking stock indices and option transactions.

Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. Past performance of any futures or option is not indicative of future success. Indicators are not a trading system and are not published as a specific trade recommendation. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.

The report/analysis herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

Discover more insights

Our subscribers have access to comprehensive market analysis from StoneX spanning commodities, equities, currencies and more.

Explore subscriptions

StoneX: We open markets

Our market expertise, advanced platforms, global reach, culture of full transparency and commitment to our clients’ success all set us apart in the financial marketplace.

Reach

With access to 40+ derivatives exchanges, 180+ foreign exchange markets, nearly every global securities marketplace and numerous bi-lateral liquidity venues, StoneX’s digital network and deep relationships can take clients anywhere they want to go.
Transparency

As a publicly traded company meeting the highest standards of regulatory compliance in the markets we serve; our financials and record of accomplishment are matters of public record. StoneX’s commitment to “doing the right thing over the easy thing” sets us apart in the industry and helps us build respect, client trust and new partnerships.
Expertise

From our proprietary Market Intelligence platform, to “boots on the ground” expertise from award-winning traders and professionals, we connect our clients directly to actionable insights they can use to make more informed decisions and achieve their goals in the global markets.

Tell us about yourself. Are you a:

First name

Last name

Company

Country

Province/Region

By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our Privacy notice to learn more.

First name

Last name

Company

Account number

Account holder name (if different from above)

By submitting this form, you are sending StoneX Group Inc. and its subsidiaries your personal information to be used for marketing purposes. View our Privacy notice to learn more.

Perspective: Morning Commentary for October 30

Discover more insights

Corn: inflection point

Top Third Closing Audio Comments

N Wheat arb: support zone